Tenant’s obligation to pay rent — Guarantor — Guarantee and lease under seal — Failure to pay rent — Claim against guarantor — Limitation period — High Court holding limitation period was 12 years unexpired — Court of Appeal holding that six-year limitation defence available to guarantor in respect of arrears of rent — Appeal allowed
The lease of shop, offices and other premises at 640 Lea Bridge Road, Leyton, Essex, was made under seal and dated November 29 1982 for a period of 21 years. The second and third defendants were parties to it as joint guarantors of the first defendant, who was the lessee. By clause 5 the guarantors agreed to make good losses, damages, costs and expenses arising out of the lessee’s failure to pay the agreed rent. Section 8(1) of the Limitation Act 1980 provided that “actions on a specialty” shall not be brought after the expiration of 12 years from the date on which the cause of action accrued, unless a shorter period was prescribed by any other provision of the Act. Section 19 provided that no action should be brought or distress made to recover arrears of rent, or damages in respect of arrears of rent, after the expiration of six years from the date on which the arrears became due.
The question arose whether the claim against the guarantors under this clause, following the lessee’s failure to pay instalments of rent when they fell due, was “brought … to recover arrears of rent, or damages in respect of arrears of rent” within section 19. If it was, the relevant period was six years. If not, then because the action was brought “on a specialty”, section 8 applied and the period was 12 years. The judge held that the limitation period was 12 years, which had not expired, and that it would be inappropriate to strike out any part of the claim. The third defendant appealed.
HeldThe appeal was allowed.
1. The lessee’s covenant to pay rent ran with the land, as did the surety’s undertaking: see P & A Swift Investments v Combined English Stores Group plc [1988] 2 EGLR 67; Royton Industries Ltd v Lawrence [1994] 1 EGLR 110.
2. Where a rent instalment was paid by the guarantor, where the guarantor expressly undertook the same obligation as the lessee, the lessee’s obligation was discharged also: see Milverton Group Ltd v Warner World Ltd [1995] 32 EG 70.
3. Section 19 applied the six-year time-limit not only to actions against the lessee, but also to actions against the guarantor of his undertaking to pay the rent reserved by the lease. In both cases, the action was brought “to recover arrears of rent, or damages in respect of arrears of rent” and the absence of any express reference to the surety was not significant.
4. The six-year limitation defence was available to the third defendant against the claim in respect of arrears of rent and each relevant cause of action arose only when payment was demanded under the guarantee. The result was that some, but not all, of those claims were statute-barred at the relevant time. The action should therefore be permitted to proceed in respect of the remaining rent claims, together with other claims, eg for dilapidations to which the 12-year limit under section 8(1) applied.
Leslie Michaelson (instructed by Brown & Emery, of Watford) appeared for the landlords; Guy Fetherstonhaugh (instructed by Penningtons, of Basingstoke) appeared for the guarantors.
